NEW BERLIN, Wis., Aug. 1 /PRNewswire-FirstCall/ -- Merchants &
Manufacturers Bancorporation, Inc. ("Merchants") (OTC:MMBI)
(BULLETIN BOARD: MMBI) announced net income of $1.4 million, or
$0.37 per diluted share, for the three months ended June 30, 2006
compared to $1.6 million, or $0.44 per diluted share for the three
months ended June 30, 2005, representing a 16.6% decrease in net
income. Net income for the six months ended June 30, 2006 was $2.4
million; a 30.4% decrease from the $3.4 million earned for the same
period in 2005. Diluted earnings per share for the six months ended
June 30, 2006 were $0.65, a 30.1% decrease from the $0.93 earned in
the same period in the prior year. The decrease in earnings for the
six months ended June 30, 2006 compared to the same period in the
prior year is partially attributable to non- recurring items
incurred during 2005. The six months ended June 30, 2006 included
pre-tax non-recurring income of $150,000 compared to $935,000 for
the same period in 2005. Earnings were also affected by a decline
in the net interest margin to 3.38% for the six months ended June
30, 2006 compared to 3.70% for the same period in the prior year.
The decrease in our net interest margin is due to our funding solid
loan growth with more expensive wholesale funding compared to the
lower cost of core deposits. Merchants' total assets increased 7.1%
from $1.4 billion at June 30, 2005, to $1.5 billion at June 30,
2006. Gross loans increased 8.3% from $1.1 billion at June 30,
2005, to $1.2 billion at June 30, 2006 due to strong internal loan
growth. Total deposits grew 6.8% from $1.07 billion at June 30,
2005 to $1.14 billion at June 30, 2006 primarily due to an increase
in brokered deposits. Michael J. Murry, Chairman, stated, "Loan
demand continues to be strong but we have struggled to attract core
demand deposits. Thus, like many banks, net interest margin
pressure has partially negated our earnings growth as we have
funded our loan growth with higher cost wholesale funding. We
believe, however, our margins will begin to stabilize throughout
the remainder of 2006 as our assets continue to reprice higher
while strong competition on deposit pricing earlier in the year has
begun to subside. We are pleased with the continued growth of our
core fee income and we continue to work hard to gain efficiencies
in our operating expenses despite significant increase in health
insurance costs." Net interest income was $11.6 million for the
three months ended June 30, 2006 compared to $11.8 million for the
same period in the prior year, and $22.9 million for the six months
ended June 30, 2006 compared to $23.4 million for the same period
in the prior year. The net interest margin was 3.37% and 3.38% for
the three and six months ended June 30, 2006, respectively,
compared to 3.68% and 3.70% for the same periods in the prior year.
The decline in net interest margin was due to strong loan growth
which was funded with higher cost wholesale funding instead of
lower cost core deposits. Despite the year over year decline in net
interest margin we believe that our margin has begun to stabilize
as we potentially near the end of the current interest rate cycle.
For the three and six months ended June 30, 2006 and 2005, the
provision for loan losses was $390,000 and $780,000, respectively,
in each period. The ratio of allowance for loan losses to total
loans was 0.99% and 0.94% at June 30, 2006 and 2005, respectively.
The ratio of allowance for loan losses to non-performing loans was
141.0% at June 30, 2006 compared to 166.9% at June 30, 2005. The
ratio of non-performing assets to total assets equaled 0.58% at
June 30, 2006 compared to 0.54% at June 30, 2005. Non-interest
income for the three and six months ended June 30, 2006 was $3.3
million and $7.0 million, respectively, compared to $3.4 million
and $7.5 million for the three and six months ended June 30, 2005,
a decrease of 4.8% for the quarter and a decrease of 6.5%
year-to-date. We continue to have modest increases in service
charges on deposit accounts that are partially offset by small
decreases in loan fee income and continued slowing of the mortgage
loan market as interest rates continue to climb. The year over year
decrease in non-interest income for the six month period is also
attributable to one-time net gains of $935,000 during 2005 compared
to $150,000 in 2006. Non-interest expense for the three and six
months ended June 30, 2006 was $12.5 million and $25.8 million,
respectively, compared to $12.4 million and $25.0 million for the
same periods in the prior year, an increase of 0.6% and 3.0%,
respectively. Salaries and employee benefits increased $328,000 for
the quarter and $838,000 year-to-date primarily due to a
significant increase in the cost of health insurance and normal pay
increases. Most other operating expenses continue to trend down as
occupancy expense decreased $135,000 for the quarter and $176,000
year-to-date, data processing fees decreased $24,000 for the
quarter and increased $39,000 year-to-date and marketing and
business development decreased $158,000 for the quarter and $49,000
year-to-date. Effective January 1, 2006, the Corporation adopted
FAS 123(R) which resulted in additional compensation cost of $5,000
and $65,000 for the three and six months ended June 30, 2006,
respectively. UNAUDITED Three Months Ended June 30, Six Months
Ended June 30, 2006 2005 Change 2006 2005 Change (Dollars In
Millions, Except Per Share Amounts) Net Income $1.367 $1.639
(16.6%) $2.395 $3.442 (30.4%) Basic EPS $0.37 $0.45 (17.8%) $0.65
$0.94 (30.9%) Diluted EPS $0.37 $0.44 (15.9%) $0.65 $0.93 (30.1%)
Merchants & Manufacturers Bancorporation, Inc. is a financial
holding company headquartered in New Berlin, Wisconsin, a suburb of
Milwaukee. Through our Community Financial Group network, we
operate seven banks in Wisconsin (Community Bank Financial,
Fortress Bank, Franklin State Bank, Grafton State Bank, Lincoln
State Bank, The Reedsburg Bank and Wisconsin State Bank), one bank
in Minnesota (Fortress Bank Minnesota) and one bank in Iowa
(Fortress Bank Cresco). Our banks are separately chartered with
each having its own name, management team, board of directors and
community commitment. Together, our banks operate 48 offices in the
communities they serve with more than 100,000 clients and total
assets of $1.5 billion. In addition to traditional banking
services, our Community Financial Group network also provides our
clients with a full range of financial services including
investment and insurance products, residential mortgage services,
private banking capabilities and tax consultation and tax
preparation services. Merchants' shares trade on the
"bulletin-board" section of the NASDAQ Stock Market under the
symbol "MMBI." Certain statements contained in this press release
constitute or may constitute forward-looking statements about
Merchants which we believe are covered by the safe harbor
provisions for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. This release contains
forward-looking statements concerning the Corporation's prospects
that are based on the current expectations and beliefs of
management. When used in written documents, the words anticipate,
believe, estimate, expect, objective and similar expressions are
intended to identify forward-looking statements. The statements
contained herein and such future statements involve or may involve
certain assumptions, risks and uncertainties, many of which are
beyond the Corporation's control, that could cause the
Corporation's actual results and performance to differ materially
from what is expected. In addition to the assumptions and other
factors referenced specifically in connection with such statements,
the following factors could impact the business and financial
prospects of the Corporation: general economic conditions;
legislative and regulatory initiatives; monetary and fiscal
policies of the federal government; deposit flows;
disintermediation; the cost of funds; general market rates of
interest; interest rates or investment returns on competing
investments; demand for loan products; demand for financial
services; changes in accounting policies or guidelines; and changes
in the quality or composition of the Corporation's loan and
investment portfolio; and the result of the Corporation's
discussions with the WDR. Such uncertainties and other risk factors
are discussed further in the Corporation's filings with the
Securities and Exchange Commission. The Corporation undertakes no
obligation to make any revisions to forward-looking statements
contained in this release or to update them to reflect events or
circumstances occurring after the date of this release. UNAUDITED
At or for the Three Months Ended June 30, 2006 2005 % Change
(Dollars In Thousands, Except Share and Per Share Amounts) For the
Period: Interest Income $22,922 $18,931 21.08% Interest Expense
11,328 7,115 59.21% Net Interest Income 11,594 11,816 (1.88%)
Provision for Loan Losses 390 390 0.00% Non-Interest Income 3,267
3,432 (4.81%) Non-Interest Expense 12,495 12,425 0.56% Income
Before Income Taxes 1,976 2,433 (18.78%) Income Taxes 609 794
(23.30%) Net Income $1,367 $1,639 (16.60%) End of Period: 6/30/06
6/30/05 % Change Assets $1,522,302 $1,420,996 7.13% Loans (gross)
1,202,693 1,110,235 8.33% Allowance for Loan Losses 11,876 10,381
14.40% Deposits 1,142,906 1,070,465 6.77% Shareholders' Equity
92,434 94,351 (2.03%) Per Share: Net Income (basic) $0.37 $0.45
(17.78%) Net Income (diluted) $0.37 $0.44 (15.91%) Book Value
$25.07 $25.51 (1.71%) Dividends Declared $0.18 $0.18 0.00% Average
Shares Outstanding (basic) 3,695,752 3,676,129 Average Shares
Outstanding (diluted) 3,697,328 3,688,793 Ending Shares Outstanding
3,687,180 3,699,253 Key Ratios: Net Interest Margin 3.37% 3.68%
Return on Average Assets 0.36% 0.46% Return on Average Common
Equity 5.71% 7.03% Shareholders Equity to Assets Ratio 6.07% 6.64%
Tier 1 Capital to Average Assets Ratio 6.24% 6.52% Non-performing
Loans/Total Loans 0.70% 0.56% Non-performing Assets/Total Assets
0.58% 0.54% Allowance for Loan Losses/ Non-performing Loans 140.96%
166.87% UNAUDITED For the Six Months Ended June 30, 2006 2005 %
Change (Dollars In Thousands, Except Share and Per Share Amounts)
For the Period: Interest Income $44,258 $36,650 20.76% Interest
Expense 21,346 13,296 60.54% Net Interest Income 22,912 23,354
(1.89%) Provision for Loan Losses 780 780 0.0% Non-Interest Income
7,034 7,525 (6.52%) Non-Interest Expense 25,751 25,002 3.00% Net
Before Tax 3,415 5,097 (33.00%) Income Tax 1,020 1,655 (38.37%) Net
Income $2,395 $3,442 (30.42%) Per Share: Net Income (basic) $0.65
$0.94 (30.85%) Net Income (diluted) $0.65 $0.93 (30.11%) Average
Shares Outstanding (basic) 3,698,744 3,675,098 Average Shares
Outstanding (diluted) 3,704,175 3,685,565 Dividends Declared $0.36
$0.36 0.0% Key Ratios: Net Interest Margin 3.38% 3.70% Return on
Average Assets 0.32% 0.50% Return on Average Common Equity 5.05%
7.48% DATASOURCE: Merchants & Manufacturers Bancorporation,
Inc. CONTACT: Michael J. Murry, Chairman of the Board of Directors,
+1-414-425-5334, or Frederick R. Klug, Executive Vice President and
Chief Financial Officer, +1-262-827-5632, both of Merchants &
Manufacturers Bancorporation, Inc.
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